- Soybeans were higher in the overnight trade and were able to add to gains through the day on Tuesday, to finish 11 cents higher. Meal led the rally and December closed above its 50-day moving average for the first time since late May. Funds were estimated buyers of 6,000 soybean and 8,000 soymeal contracts. Argentina announced Tuesday morning that it would suspend the gradual easing of export taxes on soymeal and soyoil for six months. Export taxes have slowly declined each month, from 32% in 2015 to the most recent rate of 23%. The announcement added support to Chicago soymeal trade, and lifted crush spreads. Staying long the crush has been one of the best Chicago grain trades of the year. The spot spread on Tuesday marked the best close in three weeks of $1.81/bu.
- NOPA will release July crush data on Wednesday, and the trade is positioned for a record large 162 million bu. Much of Midwest crop has now gone 3-4 weeks (or more) without meaningful rains, which need to soon fall if the US yield is to be record large. A close back above $8.85 turns technical trends higher for a test of monthly highs.
- Dec corn ended sharply higher on short covering but an otherwise lack of news. There is chatter suggesting the US and China are talking, but nothing else is known. Note that any deal struck with China immediately boosts 2019 corn acreage uncertainty. We estimate that funds this morning were short a net 70,000 contracts, up 40,000 on the prior week. US demand is forthcoming, and a bearish outlook requires confirmation of a US yield above 178. Pro Farmer’s annual tour is next week.
- Seasonally, Chicago futures in the Aug/Sep period are rather dull amid looming N Hemisphere harvests. But rallies are common thereafter, and recall 2016 was a year featuring robust export demand following drought in Brazil. A secondary bottom in corn futures will likely be formed in the next 1-2 weeks.
- Corn prices in China have posted new multi-year highs this week. Gulf corn is offered at steep discounts to Black Sea and Brazilian origin, as well as Black Sea barley. World trade will ramp up beginning in late autumn.
- World wheat futures ended higher in mediocre volume. Breaking news is absent. We estimate that since last Tuesday managed funds have sold/liquidated 22-23,000 contracts, or roughly a third of their net long held last week. Egypt bought a hefty 420,000 MTs, mostly from Russia, at an average fob price of $233. This is down slightly from Egypt’s last tender in early Aug, but in line with Monday’s fob quotes. Egypt has capitalised on the modest break in world values, but it is unlikely that global cash prices fall muchfurther. Note that Aussie prices remain perched at $300/mt (vs. Gulf HRW at $246). Another week of excessive heat persists across the Canadian Prairies. On the margin, the gap between major exporter surpluses and world trade continues to widen.
- Much of Europe will be on holiday Wednesday. A generally quiet market is expected through the balance of the week, but downside risk is limited. Funds in Chicago are now net long an estimated 40,000 contracts, which is pretty weak given current fundamentals.